Google Invests on Failing HTC to Boost its Smartphone Business

HTC had a hand in the development of the Pixel (Image Source: techradar)

HTC is reported to have been on a nosedive since 2015. The report about HTC One Max having a huge security flaw just sent the prices of its shares to drop. In the last two years, HTC has been struggling with poor sales and last year, they reported a loss of $351 million. But it seems that luck has finally turned in their favor as Google, who partnered with HTC to create the Google Pixel, has been reported to have entered into a deal with the failing company. Google will pay HTC $1.1 billion in cash in exchange for the HTC employees that were involved in the development of the Pixel.

The Google Deal

HTC’s U-11 (Image Source: bgr.com)

In a blog post by Rick Osterloh, Senior Vice President of Google Hardware, he admits that Google’s hardware business is still in its infancy and that they’re still in the process of building their core capabilities and their portfolio of products, presumably referring to the Pixel line of products that includes smartphones (Pixel and Pixel XL), a tablet (Pixel C), and two laptops (Chromebook Pixel 2013 and 2015). Among these, HTC was only involved with the development of the smartphone. The tablet and the laptops were developed by Google themselves.

This actually isn’t Google’s first time in trying their hand in the mobile phone industry: Motorola Mobility, the company that split-off from Motorola, was acquired by Google in August 2011. Google bought the company for $12.5 billion with the intention of taking control of Motorola Mobility’s patents so it could protect Android vendors from lawsuits. Three years later, Google sold Motorola Mobility for $2.91 billion to Lenovo, who intends to use Motorola to expand into the western market.

Some people think that the actual reason Google bought Motorola years ago was that Google wanted to create a much more diverse environment that centers around Android and other Google services. It also creates a competition against Samsung, who is also using the Android operating system for their smartphones. Now, no one is saying that Google might be doing something similar again. In fact, it might be different this time: during the time Google handled Motorola, Motorola phones sold cheaply. That’s because the real money-making came from using Google’s services. This time, Pixel was sold expensively, and it is rumored that Pixel 2, the Pixel’s successor, will be selling at the same price Pixel sold last year. The very first Pixel phones, Pixel and Pixel XL, came out last year, on October 4th, with a price of $850. And that’s so expensive, it can’t be denied that Google is looking to make a profit out of their hardware.

So this time, Google might be looking to not just be able to sell their services, but also sell their own units. It’s trying to be like Apple: it has their own smartphones, running on their own proprietary operating system, and is centered on using their own services.

Image Source: androidcentral.com

Would that undermine their partnership with Samsung and other manufacturers that use the Android operating system? Probably not. Google might not be planning to go toe-to-toe with its partners. If it breaks partnership with Samsung, the company might look for other alternatives which would mean a loss of profit since Samsung buyers would be using other services. Google would want Samsung to keep using Android, so Samsung users would continue using Google’s services, which is how Google actually makes money. But Google definitely also wants a piece of the pie smartphone manufacturers are having. Kinda like how Microsoft benefits from Steam’s platform because it sells PC games and almost all gaming PCs run on Windows OS. However, it also has its own store and their own gaming platform, X-box. It doesn’t matter if they don’t beat Samsung or Apple, as long as people use Android and Google services, it’s Google’s win. Google is definitely getting greedy.

HTC Suspended From Trading

And while all of this was happening and spreading out to every tech news outlet, HTC was apparently suspended from trading shares due to the rumors of Google taking over the company. HTC issued a statement confirming their suspension as a response to a request made by the Taiwanese Stock Exchange. HTC didn’t comment on the rumors, however.